Miserable B of A Earnings Reflect Bank's Miserable Past

The superbank is still very much on the mend, and still vulnerable to its past.

The end of the financial crisis has been greatly exaggerated. If you don't believe me, just ask Bank of America(NYSE:BAC) investors, who just got their fourth-quarter heads handed to them on a platter thanks to crisis-related mortgage settlements.

Bombs not quite awayThe two settlements -- one with Fannie Mae and the other with the Federal Reserve and the Comptroller of the Currency -- knocked a total of $3.8 billion from B of A fourth-quarter earnings, leaving them with net income of $732 million, or $0.03 per share.

CEO Brian Moynihan spun the results this way: "We enter 2013 strong and well positioned for further growth. Double-digit growth since last year in mortgage production, commercial lending, and Global Markets revenue." CFO Bruce Thompson had this to say: "We addressed significant legacy issues in 2012 and our strengths are coming through."

That seems to be the general line of thinking for those who are bullish on B of A: that the worst of the crisis-related damage is behind it, and that it therefore has nowhere to go but up. And those who bought B of A at the start of last year, and hung on through the darkest days, were proved right, at least in the short term: The share price doubled in value, making B of A the best performing financial stock of 2012. But I'm still not convinced the last crisis-related bomb has dropped for B of A.

Hold that trade I have no evidence of anything in the works, but I didn't when I wrote a column last month warning investors to steer clear of B of A either, and then -- two days later, the $11 billion settlement with Fannie was announced.

I'm not saying I was prescient then, and I'm not saying I'm prescient now. But even just four years on from the financial crash, I think some people have already forgotten what a thorough mess it was, and I think all of the leftover bombs have yet to be found.

But even beyond that, I also believe that B of A is missing out on one of the big, bank-profit drivers going forward: home lending. The housing market is on the rebound, and Ben Bernanke is doing all he can to ensure it keeps bounding along. Regardless of what Moynihan is quoted as saying above, while B of A made $75.1 billion in home loans in the whole of 2012, JPMorgan Chase made $51.2 billion in the fourth quarter alone.

In my opinion, B of A is still very much on the mend, and I'm just not comfortable putting my money into it yet.